Blog Post

FCC Disses AT&T, But Lets It Drop Its T-Mobile Merger Application

Call this one a not-so-sweet release for AT&T (NYSE: T). The Federal Communications Commission has said has let AT&T drop its FCC application for regulatory approval to buy T-Mobile for $39 billion. But it didn’t stop the FCC from also publishing a detailed staff analysis explaining why it thought the merger, as it has been laid out by AT&T so far, is a bad idea — a damning send-off for a merger that AT&T is still trying to push through despite the setbacks so far.

Releasing AT&T and T-Mobile from its merger application will spare the carriers from having appear at an FCC hearing that was all but guaranteed to highlight opposition not just from the regulators but from other parties, like Sprint (NYSE: S), that are against the deal.

But just so that the rest of us are clear on where the FCC stands, the regulators have taken the opportunity to release a document (link here) publicly explaining in detail why the merger is not good news.

“We conclude that the applicants have failed to meet their burden of proof to show that the proposed transaction is in the public interest,” the regulators write.

The report is fairly effective in dismantling AT&T’s arguments for why buying T-Mobile is a good idea. It highlights concerns across the gamut of areas where AT&T has said a merger would benefit users, including roaming, wholesale/retail pricing, backhaul, and in device procurement — all of which would see reduced price competition.

The report also points to flawed arguments from the applicants on service pricing and network operations (neither would see cost benefits, the FCC concluded). And it also makes a big point in spelling out the role that T-Mobile has played up to now in price and service disruption in the U.S. market — the implication being that none of that will remain if AT&T bought the company.

In one section, the report even cites AT&T’s own confidential information (redacted from the report) for how a merged entity would impact pricing for consumers in a negative way.

AT&T, caught on the back-foot by this release, was unsurprisingly critical of how it came out: “We have had no opportunity to address or rebut its claims, which makes its release all the more improper,” Jim Cicconi, AT&T’s senior executive vice president of external and legislative affairs, told Reuters.

FCC Commissioners, however, have defended their actions as justified in light of the considerable responses that they received to the merger application in the first place. “They deserve to see the staff’s analysis of the record evidence,” wrote Commissioner Clyburn.

AT&T and T-Mobile may get spared from this in an FCC hearing in the near future — that hearing will only happen when AT&T refiles its application — it will doubtless get used when AT&T has to take its case to the Department of Justice, which has also demanded its own hearing, which is expected to be take place in February next year.